REIT focuses on enclosed mall makeovers.

There are approximately 1,200 enclosed retail malls in America and a rough estimate is that about one fourth of these malls are in trouble, at least to some degree.

Some malls are witnessing eroding market share while others are experiencing massive vacancies and foreclosure.

Feldman Mall Properties, Inc. is a real estate investment trust focused on the acquisition, renovation and repositioning of these under-performing enclosed retail shopping malls. Feldman Mall Properties' investment strategy is to opportunistically acquire underperforming malls and transform them into physically attractive and profitable Class A or near Class A malls through comprehensive renovation and re-tenanting efforts aimed at increasing shopper traffic and tenant sales.

Typical candidates for the Feldman Mall Properties' strategy are enclosed malls of 500,000 square feet and above that require gross investments (including debt, equity and upgrade costs) ranging from $25 million to $150 million.

In almost all cases, the total costs of acquisition and renovation result in a total redevelopment cost well below replacement cost.

One of Feldman Mall Properties' most recent acquisitions was the Colonie Center, a 1.2 million square foot mall in Albany, NY.

The two-level shopping center, situated in the heart of New York's Capital region and minutes from the Albany International Airport and major hotel chains, has an overall occupancy of 82.6%. Anchor tenants include Macy's, Sears, Boscov's and Christmas Tree Shops (a subsidiary of Bed, Bath and Beyond).

Plans to improve overall occupancy and shopper traffic include major renovations to upgrade both the interior and exterior appearance of the mall, adding new, upscale junior anchor tenants, improving signage, redirecting and adding various entertainment features including a multi-screen Cineplex and new restaurants.

Total capital expenditures are anticipated to be approximately $25 million.

Colonie Center has extremely strong anchor tenant sales. To capitalize on these sales, our hands-on management team has launched a targeted leasing and marketing campaign.

The campaign will highlight intended renovations, the addition of one or more new junior anchor tenants, adding restaurant tenants and other capital investments.

As these projects are completed and the mall shops lease up with exciting new tenants, we will draw on the high volumes of anchor tenant shoppers, driving sales and further driving occupancy. With the completion of the Colonie Center acquisition in February of 2005 plus the acquisition of two other malls in Cincinnati and Tallahassee, the Feldman Mall Properties' portfolio, including non-owned anchor tenants, will consist of six regional malls aggregating approximately 6.2 million square feet.

Distressed malls such as these can be acquired and renovated at far below replacement cost, and these malls are often in very good locations.

We approach each mall situation by coming up with a comprehensive strategic turnaround plan.

The number one objective of the leasing campaign is to seek out new anchors and specialty retailers that don't compete with Wal-Mart or the typical power center down the block.

Our strategy involves attracting the right mix of specialty retailers which offer specialized products not available at Wal-Mart.

The strategy also combines these specialty retailers with an entertainment anchor such as a multiplex theater and a series of upscale restaurants.

Feldman Mall Properties' also likes to fill its malls with a series of junior anchors.

This strategy solves several problems at the same time. First, by filling the mall with a series of "big-box" specialty retailers as anchors, the mall is less dependent on traditional department stores that have been steadily losing market share to the discounters.

Also, by filling the mall with a series of smaller junior anchors, the solvency of the mall is less threatened by the potential bankruptcy of a large department store or a decision by a department store to shut down a particular location.

Effective capital investment is also key to the success of a mall turnaround. These investments vary from project to project, but include a) leasing to a new major powerful drawing anchor tenant or a series of attractive junior anchor tenants b) the renovation of exterior facade of the mall, (c) the renovation of the mall entrances, (d) an upgrade to the mall's common area corridors and lighting, (e) the mall's entire parking lot will be resurfaced and re-striped and (f) the mall's signage will be significantly upgraded.

In addition to renewing profitable high-volume tenants at the best possible market rents, the re-leasing process also includes weeding out unhealthy, low volume or unprofitable stores in a proactive way that allows failing tenants to cut their losses by buying out of their leases and applying the resulting short-term income towards incoming tenant inducements.

Successful mall turnaround also includes improving visibility of key tenants, constructing new entrances or implementing ways to improve shopper circulation throughout the property. It also involves intensive marketing programs geared to the local trade area and promotional activities that assure a constant flow of events occurring at the mall, such as musical performances, sports promotions, radio station events and hosting other civic and charitable functions. In order to maximize the value in every asset we own, Feldman Mall Properties has assembled a hard hitting executive management team with a "get it done now & get it done right" philosophy.

Each member of our management team averages more than 20 years in commercial real estate and four of our five officers have worked together for the last 10 years or more.

Over the remainder of 2005 we expect to acquire additional targeted mall properties, focusing on major market locations or very strong secondary markets with densely populated and growing populations.

As a long term goal, we want to be a very profitable niche player in the mall renovation business.

In most cases, we do not intend to compete in bidding wars with the other mall REITS to acquire properties. Rather, we see ourselves as a provider of stabilized properties to the other mall REITS, or institutional investors, as we perform our "mall makeovers."

LARRY FELDMAN

CHAIRMAN & CEO 

FELDMAN MALL PROPERTIES